Telecom giant Rogers Communications Inc. is conspicuously absent from the list of suitors interested in acquiring the Ontario Teachers' Pension Plan's majority stake in Maple Leaf Sports and Entertainment.
High-ranking sources at Rogers say the company has "very little" interest in putting in a bid, even though there were reports late last year that Rogers was in talks to buy MLSE. The sources said Rogers walked away from any notion of buying the Toronto Maple Leafs and the Toronto Raptors and other MLSE assets last spring and never revisited the idea.
Teachers confirmed this weekend that it is now soliciting bids for its 66-per-cent stake in MLSE, which includes more than a billion dollars worth of assets that also includes the Air Canada Centre and the Toronto FC soccer team. The pension fund expects to decide by summer whether to sell the stake.
Teachers' decision to put its stake on the block came after the it began getting inquiries about buying the sports company over the past few months. Several foreign and domestic firms are believed to have suggested to Teachers that they would pay a premium. Teachers is said to be asking about $1.5-billion for its stake.
That would represent a 25-per-cent premium on the $1.8-billion estimated value of the company.
But for Rogers, which spoke briefly about purchasing MLSE at around the time of the NHL playoffs last year, control over the company proved a stumbling block. Talks never got off the ground because the telecom giant expressed curiosity about a deal only if it could control all of the broadcast rights for the sports properties, and could control the company outright. Rogers executives expect to be invited to look at MLSE's books when the formal auction process begins, but the company does not intend to change its mind.
"I don't think that there's much interest at this time," said a senior source at Rogers who is directly familiar with the company's mergers and acquisitions strategy. "We had looked at this a year ago now. And there was no interest at that time."
But construction magnate Larry Tanenbaum, who owns 20.5 per cent of MLSE, will have the opportunity to match the highest bid that Teachers is able to stir up in its auction process. Rogers would only be interested if it was able to control MLSE.
Mr. Tanenbaum was in Florida and unable to comment Sunday but sources close to the situation said that he has not decided on any course of action yet. He now has the luxury of watching how Teachers attempts to create a bidding war for the shares plays out. But it's clear that Mr. Tanenbaum does not plan to sell his shares.
Mr. Tanenbaum's options are to make a play for the Teachers' shares by himself with the help of a commercial lender or outside business partners; to form a partnership with one of the expected bidders, which could include BCE or Shaw Communications; or sit back and see what price an auction with other bidders brings and then decide if he wants to match it.
The partnership agreement between him, Teachers and TD Capital - which holds the remaining 13.5-per-cent stake in MLSE - means it could cost him more than the $1.5-billion that Teachers wants for its stake.
Under the agreement, Mr. Tanenbaum and TD Capital can buy Teachers' shares in proportion to their own share of MLSE. This means Mr. Tanenbaum can buy 60.3 per cent of Teachers' shares.
However, the shareholders have to take all of the shares offered or none. So Mr. Tanenbaum would have to be prepared to buy all of the Teachers' shares he is entitled to, and all of the shares that TD is entitled to.
A source close to Teachers said it decided to conduct an official auction process after a number of potential bidders, both in Canada and abroad, came out of the woodwork this winter.
The interest suggested to Teachers that now might be a good time to sell, although it is still possible the pension plan will decide not to do so, sources said.
The pension plan is reaching out to a host of players, including media and telecom giants. Names expected to be invited to have a look at the books in addition to Rogers include Bell and several U.S. investors.
Control over the broadcast rights was not the only sticking point for Rogers last spring, but it was the primary factor. Rogers would want to leverage the content on TV and mobile platforms for its own use. Even as majority owner of MLSE, Rogers would still be governed by a company charter agreed upon by all the shareholders that requires broadcast rights to be auctioned off to the highest bidder. On cable, Leaf games that are shown on TSN, Rogers SportsNet and Leafs TV are usually sold for about $750,000 per game.
Neither Bell nor Telus responded to requests for comment on Sunday.
- With files from reporter Iain Marlow in Toronto